Rediscovering growth after the crisis?
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Dr. Andrew Sentance presented on the "new normal" of economic growth in Western economies after the financial crisis. He outlined that growth rates since the crisis have been much lower than in the decades prior. Productivity growth across Western nations has also slowed significantly. The key drivers of strong pre-crisis growth, like easy monetary policy and confidence in institutions, may not return quickly. The presentation described the current phase of disappointing Western growth and volatility that could persist into the mid-2010s and a potential new growth phase later in the decade based on different drivers.
Rediscovering growth after the crisis?
- 1. www.pwc.co.uk Rediscovering growth - after the crisis Dr Andrew Sentance Senior Economic Adviser, PwC Capital Markets Top Seminar Aalto University, Helsinki, 25th September 2014
- 2. Growth trends in the “New Normal” average % per annum GDP growth in major Western economies 4 3,5 3 2,5 2 1,5 1 0,5 0 Source: OECD *GDP-weighted PwC ݺߣ 2 -0,5 1989-99 2000-07 2010-14 The new normal
- 3. Sluggish productivity across the West GDP per person employed in major Western economies, 2006=100 120 115 110 105 100 95 Canada Finland France Germany Italy Netherlands Spain UK US Source: IMF World Economic Outlook, April 2014 PwC 90 2006 2007 2008 2009 2010 2011 2012 2013 2014 ݺߣ 3 The new normal
- 4. Pre-2007 growth drivers have been undermined PwC Sustained growth Easy money Cheap imports Confidence in policy regime ݺߣ 4 The new normal
- 5. What is the “new normal”? • 2007/8 marked the end of a long and sustained expansion in UK and other Western economies • Conditions which supported this period of growth are not set to return quickly • Prolonged structural readjustment underway in response to financial crisis and East-West rebalancing • Significant parallels with disappointing growth and volatility of the 1970s and early 1980s The new normal PwC ݺߣ 5
- 6. Two phases of the “new normal” Current Phase: Disappointing western growth to continue into mid-2010s Financial volatility persists High and fluctuating energy and commodity prices New Growth Phase? Clearer and more sustained growth dynamic emerges Perhaps starting in the second half of this decade Different set of growth drivers from pre-2007 long expansion Some Western economies better placed than others Businesses, policy-makers and investors need strategies to manage and survive through current disappointing growth, while building potential opportunities for the future. PwC ݺߣ 6 The new normal
- 7. Business success in the “new normal” Opportunities in Asia and emerging markets Harnessing technology and innovation Repositioning for structural and market change Increasing business flexibility and adaptability Efficient use of energy/resources The new normal PwC ݺߣ 7
- 8. 2014 Global Economic Weather Map Source: PwC main scenario PwC Russia Germany UK US Brazil Greece India 1.7 Spain Key Canada Mexico South Africa 0.5 Japan Australia Italy Ireland 3.0 France 2.2 2.3 2.6 0.9 0.9 1.8 2.0 0.1 0.3 1.8 5.3 2.6 7.4 1.5 x.x = GDP growth in 2014 China ݺߣ 8
- 9. Europe’s North-South divide Unemployment as % of labour force 18 16 14 12 10 8 6 4 2 Source – PwC calculations based on ILO standardised unemployment rates The new normal PwC ݺߣ 9 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 N & E Europe (inc UK) S Europe & France United States
- 10. Policy agenda for growth • Regional and global trade liberalisation • Strengthening the supply-side of the economy PwC Effective competition and business regulation Tax reform Labour market flexibility and efficiency Infrastructure, education/training and research • Public sector restructuring and reform • Orderly exit from monetary stimulus The new normal ݺߣ 10
- 11. More on Rediscovering Growth … Email: andrew.w.sentance@uk.pwc.com Blogs: http://pwc.blogs.com/economics_in_business/ and http://andrewsentance.com/the-hawk-talks Book: “Rediscovering growth: After the crisis” Twitter: @asentance This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. © 2014 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom) which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity. Design: ML3-2011-11-22-0836-NB